As we know, 2020 was a tough year for the travel industry, the hospitality sector is still struggling to get back on track, cruise ships are still in harbors with very few of them starting to sail and many airplanes are still grounded due to the lack of demand. In 2020 after COVID-19 struck the industry and lockdowns began to be implemented more than 5.9 billion passengers were removed, representing a decline of 62.3% of global passenger traffic according to Airports Council International. After more than 20 years of passenger traffic growth, the pandemic managed to hit hard airlines all over the Globe. Europe followed by the Middle East and Africa were the most impacted regions, with Europe seeing a decline of 70.5% compared to the projected baseline. On the other hand, Asia-Pacific was the least impacted of all regions with a decline of 53.7% compared to 2019 but as we know, Asia-Pacific’s market is one of the largest in the World, and even if it had the least percentage of loss that meant a loss of 1.95 billion passengers in 2020 compared to the projected baseline, the largest number of passengers in the World.
International passenger volume ended the year slightly below 1 billion passengers, a decrease of more than 73.7% compared to 2019 volume. Domestic passenger traffic volume was helped by the early recovery of major domestic markets like China and Russia. In this context, many airlines struggled to survive and some retired airplanes or fired personnel but governments stepped in and gave funds, for example, Air France was helped by the EU and France with $4.7 billion in funds and $11 billion in loans, while Lufthansa has agreed on a rescue deal worth €9bn with the German government that saves it from collapse. In the United States, Congress provided the industry with more than $50 billion in aid to help keep pilots, flight attendants, baggage handlers, and other workers employed. The governments also provided $25 billion in loans. All of that aid came with strings attached, including a ban on stock buybacks, a restriction on dividends, and limits on executive pay.
But what happened in 2021 until now? Even if prices remained high this summer, we saw an increase in the number of passengers traveling around Europe due to vaccinations and approval of the green pass which permitted a more universal approach around EU countries. American airliners are reporting better sales in the summer of 2021 but the delta variant of COVID-19 may reduce the number of travelers at the end of the year. United Airlines said it expected to be able to make money even with corporate and long-haul international travel down 35 percent. The airline’s chief executive, Scott Kirby, said he was confident United would beat its 2019 profits in 2023 but an Airports Council International study suggests that we can see a recovery around 2025 and later. Airlines collectively lost $6.9 billion in the April-May period in 2021 compared to $14.4 billion in the first quarter of the year, according to new data from the International Air Transport Association. In the second quarter, global passenger revenues declined by 50% compared to pre-crisis levels, with North American airlines again leading the way with a revenue decline of 49%. Cargo continues to be a savior for passenger airlines, with revenue up 72% from the 2019 level on the strength of strong demand and yields, IATA said in its financial report. Operating costs declined too, but at a slower rate (-35%) than revenues. Free cash flow improved 29% from the first quarter based on IATA’s sample of airlines. Following several months of upward trajectory, average Brent crude oil and jet fuel price ticked down in August over concerns the delta variant will slow global growth and because oil producers increased output. However, by month’s end, Brent had recovered most of its decline, with middle distillates like jet fuel recapturing most of the price slide. Jet fuel prices are currently around $71.60 per gallon.
What we can say for sure is that some countries around Europe are reaching their vaccination goals while others remain behind and this can affect travelers from those countries. Vaccination and new medicine will help the traveling industry to recover and, in a few years, we may see an increasing number of passengers aboard.